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Editor's note: Paul Carttar brings more than thirty years of experience across sectors – public, private, and nonprofit – to his work, most recently as the initial director of the Social Innovation Fund (SIF), a priority program of the Obama Administration.

At first glance, it would appear that all is well with social innovation in the US, as each year, thousands of new nonprofit organizations are founded with promising programs to help people in need.

Sadly, appearances can be deceiving.

The reality is we are not getting the full potential benefit of social innovation in the US, but not because we lack invention. Rather, it’s because the best of these invented solutions rarely grow to serve sufficient numbers of people to raise the overall level of impact generated by the investment we, as a society, make in addressing our key social challenges.

In this time of daunting needs and severely constrained resources, our imperative is clear – to progress, we must find ways to get more impact from each dollar we spend toward social causes, whether public or private. Fortunately, in social innovation we have a powerful vehicle for doing this, one with deep roots in American civic tradition. While social innovation is not in essence a government-dependent process, the Obama Administration and Congress should seize the opportunity to aggressively leverage the distinctive capabilities of the federal government to foster social innovation to the benefit of all Americans.

What is social innovation?

“Social innovation” is a dynamic, ongoing process in which superior solutions to social problems are developed and widely implemented. It is about replacing existing programs, practices and approaches with ones that are better, not simply new – where “better” means yielding greater social impact per unit of input invested.

This process has three key requirements. First is invention: people must develop ideas for how problems can be addressed more effectively. These might be big, system-wide changes that hold the potential for broad, transformative impact, or they might be incremental adjustments that still produce better results for the resources invested. Second is evidence: new models must be rigorously tested and assessed to determine if they are, in fact, better. Third is resources: those solutions actually shown to deliver superior results must receive additional resources, both financial and human, to fuel expansion.

We do well with invention but not the other two. In general, we have an astonishing dearth of evidence about the relative impact of different solutions, which undermines our ability to determine who the best performers actually are. As for resources, while there certainly are constraints, our core problem is not the amount of money per se but its allocation. Simply put, too many funders – including government agencies and foundations – are not maximizing the benefits of their spending, because they do not base major funding decisions on disciplined assessments of a program’s likely impact on people’s lives. As a result, we can increase funding for the best solutions without having to increase the total amount of money spent on social causes.

So where does the government fit in?

The social innovation process is organic, creative, meritocratic, and relentless, and it does not depend on government to thrive. This has been shown time and again in the US, where we have a long tradition – famously noted by Alexis de Tocqueville – of individuals and communities devising ingenious solutions to seemingly-intractable problems.

That said, productive federal government involvement is required for our country to realize the full potential benefit of social innovation, for a very simple reason. There are sizable segments of the social sector – largely relating to the provision of social services – where the federal government has become by far the biggest player, spending tens of billions of dollars annually. By comparison, the Bill and Melinda Gates Foundation, easily the largest private foundation in the world, awarded a total of “only” $3.2 billion last year, less than 20% of which was focused on the US.

This distinctive status as “funder-in-chief” in the social arena – not the more familiar role of “regulator-in-chief” – endows the federal government with unique standing and authority to positively affect flows of funding and improve evidence and evaluation practices. And it is this authority that the federal government should leverage to increase innovation and impact. What the social sector and those who rely on it most need from the federal government is for it to be a smart, results-oriented funder that finds and grows the best available solutions to advance agency missions – not for it to enact more rules or policies that mandate behaviors by non-federal parties.

Where should we go from here?

To be sure, progress is being made. Momentum for higher-impact funding approaches grew through the Clinton and Bush Administrations and has significantly accelerated under President Obama, highlighted by creation of the “innovation funds” – especially the Social Innovation Fund in the Corporation for National and Community Service and the Invest in Innovation (i3) program in the Department of Education. These initiatives were purposely designed to identify and grow programs with evidence of compelling impact and to create new, more effective funding models that other federal departments could adopt. Other promising actions include efforts by the Office of Management and Budget (OMB) and the White House Office of Social Innovation and Civic Participation to encourage adoption of innovative practices by federal agencies and the decision by OMB to reward evidence in weighing agency funding requests in the FY 2014 federal budget process

Given our current circumstances, however, much more needs to be done, with a greater sense of urgency, if the US is to make substantial progress against major social challenges. The federal fiscal situation is stark and unlikely to improve for many years. There are no easy answers. We must dramatically increase the impact we realize for each dollar we invest. Given the many billions of dollars the federal government will inevitably spend on social services in future years, the Administration and Congress should aggressively pursue three courses of action:

First and most critical, the federal government should decisively expand and accelerate its efforts to drive federal funding toward programs that represent the best-known solutions to priority problems, even at the expense of entrenched grantees that enjoy strong political support. Only a small share of federal money is currently allocated through competitive, evidence-based selection processes focused on measurable results. This must change, and we know how, beginning with applying the lessons gleaned from the innovation funds and other evidence-based processes. The open question is whether we have the will, as this requires stronger direction from the White House and OMB to federal agencies and legislative action by Congress.

Second, the federal government must ensure that the evidence-based programs it supports are being managed to maximize their results for people served. This starts with creating a regulatory context that enhances, rather than impairs, the ability of high-impact programs to achieve promised results. Now, all federal grantees are subject to an imposing array of rules designed to ensure compliant execution of specific activities and avoid “waste, fraud and abuse.” Many impose costly administrative processes on grantees or restrict their ability to best deploy the funds. Remarkably, the government mandates that these regulations apply not only to federal funds but also to all private dollars donated to satisfy match requirements – which in some programs such as the Social Innovation Fund can exceed federal dollars by more than 2:1. In addition to depressing program impact, such rules can also discourage participation by the most capable donors and nonprofits. These changes, too, would require strong executive and legislative leadership.

Third, every federal agency employing pro-innovation funding and management processes should take proactive steps to maximize their positive ripple effects for the broader nonprofit and public sectors. The government’s stature as funder-in-chief not only imposes a responsibility to make good funding decisions and manage programs well, it also establishes the government – like it or not – as a model for other funders and nonprofits to emulate, where key practices often constitute a de facto standard. Examples of productive federal actions would include:

Ensuring that key requirements applying to grantees, such as guidelines for program evaluation, represent sensible, cost-effective, generally-applicable practices;

Establishing consistent program metrics and performance indicators that have the potential to be embraced as de facto standards within relevant issue-areas;

Actively capturing and sharing the insights, practices and knowledge generated through these programs and the providers delivering them;

Publicly posting any types of administrative data collected by the federal government that might be useful to anyone developing innovative practices or approaches.

Inevitably, there are many obstacles to pursuing these actions. Existing beneficiaries of the status quo will aggressively defend their positions. Federal bureaucrats in deeply ingrained cultures of distrust will resist change. Many politicians will continue to support formulaic allocation processes that benefit favored constituencies.

But, given the nature of these times, we must hope that our social sector funder-in-chief will not be deterred and will aggressively embrace innovation as the surest means to overcoming our critical social challenges moving forward. After all, it’s an American tradition.

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